Average rents in prime central London rose 0.7% in the year to February, while there was a 1% increase in prime outer London, Knight Frank reveals.

The rental increases in February are less dramatic than they were three years ago, when growth in the two parts of the capital was closer to 20%.

Although supply has risen since then, Knight Frank says there are signs that nervousness around future legislative changes is having an impact on landlord sentiment.

The upcoming Renter’s Rights Bill includes proposals that means it may become harder to evict tenants and raises risks around collecting rental income.

Alongside this, landlords will have to weigh up their options against a background of tighter green legislation, rising mortgage rates and less favourable inheritance tax rules introduced in the budget.

While the number of new rental listings in prime central and prime outer London in February was 12% higher than three years ago, it was 5% lower than the same month last year, Rightmove data shows.

Knight Frank suggests a degree of hesitation among landlords, which will maintain or increase upwards pressure on rents.

The independent real estate agency revised up its own rental value forecasts in November due to the legislative uncertainty and expected growth of 3.5% this year in both markets.

In terms of demand, the number of new prospective tenants registering in the first two months of this year in London was 1% higher than last year, with the number of tenancies increasing by the same amount.

Meanwhile, the number of super-prime tenancies in the six months to February was 9% higher than the same period 12 months ago.

Corporate demand is also stronger than last year. The number of enquiries from companies for UK lettings properties was 18% higher in February than 2023.

Corporate relocations to London and the surrounding area are typically from the energy, finance, professional services, legal and tech sectors.

Knight Frank head of relocation and corporate services John Humprhis says: “It has felt like business as usual in the first two months of the year. Although stock is in short supply in some lower-value markets.”

“Tenants will be hoping that supply holds as steady as demand during the rest of the year.